Introduction
China’s competitive landscape increasingly revolves around technological innovation and critical business intelligence. Trade secrets – encompassing undisclosed technical and operational information with commercial value – are vital assets for business survival and growth. Defined under Article 9(4) of China’s Anti-Unfair Competition Law (AUCL), they require three elements: secrecy, commercial value, and confidentiality measures by the rights holder. With evolving market dynamics and significant legislative developments in 2025, understanding China’s multifaceted protection framework is crucial.
I. China’s Evolving Trade Secret Legislative Landscape (2025 Key Updates)
China’s trade secret legal framework is undergoing substantial modernization to address new challenges, particularly in emerging technologies:
1. The Pending Secrecy Protection Regulation
A landmark development is the Market Supervision Administration’s (SAMR) draft Secrecy Protection Regulation, open for public comment until May 25, 2025. This comprehensive regulation [1][2][3][5][6] aims to replace the outdated 1995/1998 rules, offering much-needed detailed guidance on defining trade secrets (especially complex technical information like algorithms, plant varieties, and AI-related data [4][7]), specifying infringement types, and clarifying investigation procedures for administrative enforcement. Its finalization as a priority 2025 legislative project signals a stronger regulatory stance.
2. Localized Guidance & Emerging Sectors
Regions are actively supplementing national frameworks. Beijing’s Haidian District released guides specifically addressing internet company secrets and cross-border enforcement[1]. Crucially, Shanghai’s Market Supervision Bureau, in its June 2025 Guide, explicitly tackles AI-era challenges, advocating that entities classify sensitive data like game content and AI training models as protectable business information and implement robust technical safeguards [7].
3. Strengthening the AUCL Foundation
The 2017 and 2019 AUCL revisions laid critical groundwork by refining the definition, easing the plaintiff’s burden of proof (Art. 32), expanding infringement scenarios/punishments, and increasing statutory damages caps. The ongoing push for a third AUCL revision further underscores the commitment to enhancing protection [1][3][10].
II. Three Pillars of Enforcement: Navigating Civil, Criminal & Administrative Paths
Businesses leverage three primary avenues for redress:
1. Civil Litigation (Comprehensive but Evidence-Intensive)
Jurisdiction & Threshold: Filed in courts where infringement occurred, had impact, or where the defendant resides. Initiating a case requires a complaint and preliminary evidence.
The Evidence Challenge & Burden Shift: Historically, plaintiffs bore the full burden (secrecy, value, confidentiality, infringement). The landmark Art. 32 (2019 AUCL) alleviates this: plaintiffs show reasonable proof of confidentiality measures and infringement, shifting the burden to defendants to disprove infringement [10].
Timeline & Complexity: Cases typically last 1-2 years for first instance; complex technical cases (appraisal-dependent) or jurisdictional disputes can extend this. Appeals add ~1 year. Significant/technical cases now often start at the Supreme People’s Court IP Tribunal.
Damages: Calculated based on actual losses, infringer’s gains, or statutory damages (up to RMB 5 million). Punitive damages (1-5x) apply for intentional, severe violations. Recent landmark cases (e.g., Vanillin – RMB 159M; Oct 2023 Tech Case – RMB 50M) show courts considering development costs, lost profits, and future value. Success rates, however, remain relatively low due to stringent proof requirements, particularly defining the scope of the secret versus public domain elements.
2. Criminal Enforcement (Deterrent but High Initiation Threshold)
Jurisdiction: Local Public Security Bureaus (PSB) handle investigations.
Challenges in Case Acceptance: Reporting a criminal case requires substantial initial evidence (identity, proof of secret existence, preliminary infringement proof, scale of damages), making initial acceptance difficult (e.g., Zhejiang requirements).
Powerful Leverage: Once accepted, PSB powers overcome key evidence hurdles (search warrants, seizures, interrogations). As in the Kapo case, securing a criminal conviction provides potent evidence for follow-on civil claims. Duration is faster (3-6 months investigation, + ~3 months trial). Penalties include imprisonment (3-10 years) and fines, offering strong deterrence.
3. Administrative Enforcement (Fast & Proactive Evidence Gathering)
SAMR’s Role: Local Market Supervision Bureaus (MSBs) handle reports. Thresholds for case acceptance are generally lower than criminal paths.
Key Advantage of Investigation & Preservation: MSB investigators proactively gather evidence and can order accused infringers to produce materials. Crucially, they can preserve evidence likely to be destroyed or lost [7][8], a critical tool given the nature of secret infringement. Resolutions typically occur within 3-5 months.
Limitation & Synergy: MSBs cannot award damages; they mediate or issue injunctions/penalties. Rights holders often use MSB-gathered evidence as the foundation for a follow-on civil lawsuit to recover losses. SAMR is actively strengthening administrative-criminal linkages for serious cases, ensuring fast transfers (应移尽移、快移快办) to PSB [7].
Strategic Enforcement Integration: Combining pathways is key. Civil suits have low initiation thresholds but face evidence hurdles. Administrative actions (evidence gathering) or criminal complaints (investigation power) before or alongside civil litigation can be highly effective. Shanghai’s practice exemplifies coordination between MSB, PSB, and courts [7].
III. Key Challenges & Proactive Protection Strategies for 2025
Despite stronger laws and enforcement, challenges persist, necessitating robust internal safeguards:
1. Proving the Existence & Scope: Clearly defining the exact confidential technical/operational information before conflict is crucial. Vague claims risk dismissal. The SPIPC emphasizes specificity regarding elements within drawings/processes. Even if components are known, unique combinations may still be protectable.
2. Evidence Collection: Covert infringement demands proactive measures. Utilizing Art. 32 (AUCL), seeking preservation orders (civil), or leveraging MSB/PSB powers are vital.
3. Building a Defensible Protection Regime (Beyond Contracts): The Shanghai 2025 Guide [7] highlights best practices extending far beyond simple NDA clauses:
Comprehensive Internal Policy: Develop a tailored secrecy protection policy/manual classifying information, defining handling procedures (electronic/coding management, labeling), identifying custodians, and restricting access. Track access rigorously.
Employee Management: Conduct regular, documented training. Include specific confidentiality terms in contracts and utilize project-specific commitment letters. Focus vigilance on departing employees (high-risk cases).
External Relationship Safeguards: Execute NDAs with partners/vendors detailing the secret scope and obligations. Employ negotiation tactics like controlled disclosures and secure document handling.
AI & Emerging Tech Focus: Implement specialized technical controls (access logs, encryption, network segmentation) for AI models, core algorithms, datasets, and game/software IP [7].
IV. Conclusion & Outlook
China is clearly dedicated to enhancing the protection of trade secrets through active legislative efforts (such as the AUCL revision and the Secrecy Protection Regulation), improved court interpretations (including higher damages and clearer scope rulings), and better coordinated enforcement (collaboration among MSB, PSB, and the courts). The emergence of AI and advanced technologies introduces new challenges that are specifically addressed by recent guidelines, such as Shanghai’s 2025 Handbook.
Achieving success necessitates a two-pronged strategy: first, establishing a legally sound internal protection system that includes policies, access controls, training, and specialized technological measures; second, effectively utilizing China’s enforcement mechanisms—often in tandem (combining administrative and civil actions, or criminal and civil actions)—and employing tools like evidence preservation and the burden shift outlined in AUCL Article 32.
Companies operating in the Chinese market should prioritize trade secret protection as a fundamental aspect of corporate governance and risk management, while keeping up with the rapidly changing regulatory environment leading up to 2025. There will likely be an ongoing emphasis on international collaboration and adapting enforcement strategies to keep pace with technological developments.
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